Kotobuki Spirits' (TSE:2222) five-year total shareholder returns outpace the underlying earnings growth

It hasn't been the best quarter for Kotobuki Spirits Co., Ltd. (TSE:2222) shareholders, since the share price has fallen 16% in that time. But that scarcely detracts from the really solid long term returns generated by the company over five years. We think most investors would be happy with the 117% return, over that period. To some, the recent pullback wouldn't be surprising after such a fast rise. Only time will tell if there is still too much optimism currently reflected in the share price.

In light of the stock dropping 3.6% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.

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While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During five years of share price growth, Kotobuki Spirits achieved compound earnings per share (EPS) growth of 24% per year. This EPS growth is higher than the 17% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We know that Kotobuki Spirits has improved its bottom line over the last three years, but what does the future have in store? If you are thinking of buying or selling Kotobuki Spirits stock, you should check out this FREE detailed report on its balance sheet.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Kotobuki Spirits the TSR over the last 5 years was 127%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's nice to see that Kotobuki Spirits shareholders have received a total shareholder return of 16% over the last year. Of course, that includes the dividend. However, the TSR over five years, coming in at 18% per year, is even more impressive. Before forming an opinion on Kotobuki Spirits you might want to consider these 3 valuation metrics.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Japanese exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.